Commercial real estate market slowing

Published
8:00 pm EDT, Tuesday, July 15, 2008

REGION

BY CHRIS BOSAK

Hour Staff Writer

The outlook for commercial real estate in Fairfield County may not be as positive as it was six months ago, but as Jim Fagan, senior managing director for Cushman & Wakefield, puts it: "You can't expect it to be rosy forever."

Not that the news is so terrible here.

"It will be hard work for the next 12 months, but we're optimistic for the future," said Fagan at Cushman & Wakefield's mid-year market presentation on Tuesday at Delamar Hotel in Greenwich.

Fagan said there has been a slight decrease in leasing activity in Fairfield County, but a significant decrease in investment sales. He added that vacancy rates are up, absorption rates are down -- "that's a very worrisome trend," Fagan said -- and leasing activity is down. Meanwhile, rental rates are flat, supply is constrained, and "sales of buildings have dropped off dramatically from where they were in 2007," he said. "There's a lack of confidence. Everyone is taking a wait-and-see approach."

Tad Diesel, the city's director of marketing and business development, said Norwalk has at least two major victories to point to in the first half of 2008.

"We had the very important sale of the SoNo properties to FD Rich. That's a huge statement for a company of that stature to make a bet on Norwalk," Diesel said. "Also, iPark has shown real success in the first half of 2008. Right there are two tremendous achievements for Norwalk."

Fagan was also upbeat about Norwalk. He said the developers of the District 95/7 SoNo project (Reed-Putnam) may have a tough time building in this economy, but it would be worth it in the end.

"It's one of the coolest projects in Fairfield County," he said. "It's such a great location. You can see it from the highway, the water is right there, it's close to SoNo and the train station. It will have its challenges, but people know that the economy is cyclical.

"iPark is doing well, and we'd like to have it fully leased," Fagan added. "It provides a good value to tenants, they get a great space for less money. That's pretty important in this economy."

A Norwalk-based company is looking to make a significant contribution to Stamford. Building & Land Technology has been brought on by Antares to help develop Stamford's massive Harbor Point project in the city's south end. Building & Land Technology built The Towers at Merritt River in Norwalk and attracted tenants such as Diageo, Hewitt, Xerox and General Electric.

"I would never bet against the Kuehners," Fagan said about B&LT principals Carl and Paul Kuehner. "They have shown they are very astute."

Still, it's a different economic landscape than it was six months ago when Cushman & Wakefield held its last market presentation.

"We expected one thing and they changed," Fagan said. "It's a market where things are changing very quickly. Six months ago, we said things were sizzling hot and now there's talk of recession. Financial firms were driving the market in 2007 and now they are laying off."

Cushman & Wakefield economist Ken McCarthy added: "We're living in a world of expensive energy, subprime mortgages and a credit crisis hurting financial institutions. Now we're starting to see job loss. That wasn't so six months ago," he said. "Oil prices are up 100 percent from a year ago, and other commodities are also dramatically higher."

McCarthy said any number of singular events would positively turn around the economy quickly: slower growth in China (Olympic-sized hangover); Saudi Arabia producing more oil; evaporation of speculation in oil prices; global bailout of struggling economies; and a revival of the housing market.